Broker Check
How Insurance Can Be Used for Retirement Planning

How Insurance Can Be Used for Retirement Planning

May 29, 2024

When people think of life insurance, the first thing that may come to mind is ensuring your loved ones are covered enough should something happen to you. It is a concern that more than half of all Americans consider, with at least 52% of them covered by life insurance in 2023 according to LIMRA. However, some insurance policies can help you with more than just a lump sum payout in the event of a tragedy.

With the proper structure, life insurance policies can become financial assets like an IRA or mutual fund. These types of insurance build cash value over time that you can use during your life. Depending on what kind of insurance you buy, you may be able to borrow against your policy, or withdraw from it without being subject to a penalty.


Key Takeaways

  • Life insurance has the option of being a financial asset for use in your lifetime.
  • A cheaper term life insurance policy may leave money on the table for investing opportunities.
  • Two types of permanent life insurance can be used as an asset.
  • You can withdraw from or borrow against your cash-value account depending on your policy.


Managing your insurance coverage and exploring investing opportunities


Term life insurance

Generally, term life insurance is less expensive than permanent life insurance, although it is hard to say how much cheaper since so many variables are included in the calculation, including age, health, family history, and gender.

Term life insurance offers a flexible coverage period, tailored to your specific needs. In the unfortunate event of your premature death during the active policy period, the insurance company will provide a specific amount to your beneficiaries. It's important to note there is no residual value if such an event does not occur.

By choosing term life insurance, which can be significantly more affordable than other options, you can potentially unlock extra funds for investment. These savings can be used as part of an investment strategy that allows you to align your investment preferences and goals with your life insurance plan.

Managing your insurance policy as a financial asset


Permanent life insurance

Permanent life insurance can help you build cash value that you may tap into if you need to during your life. There are two types of permanent life insurance:

  • Universal
  • Lower premiums
  • More flexible premium offers
  • Potential cash value growth
  • Option to increase or decrease the death benefit
  • Fewer guarantees compared to the more expensive whole life insurance
  • Investment features (however, there are no guaranteed returns)


  • Whole
    • Higher premiums
    • Fixed premiums
    • Guaranteed death benefit
    • Guaranteed cash value growth
    • Helpful in complementing your existing retirement savings


Other retirement planning options using insurance


Long-term care insurance

Long-term care (LTC) insurance can be used for retirement planning to help manage the financial impact should you or your spouse require specific care without the burden falling back on your loved ones. According to, 65-year-olds today have a nearly 70% chance of needing long-term care services and support, and nursing home care costs have soared to over $108,000 annually for a private room. The average age of residents of assisted living facilities is 84.

Long-term care insurance doesn’t just impact the individuals who need it; it also affects the families on a personal and often financial level. These needs can pose significant challenges for families, and remarkably, the New York Times reported that only about 3 to 4 percent of Americans 50 and older pay for a long-term care policy.


Cash-value life insurance

This insurance option is typically available with both universal and whole-life policies, which generally cost more than a term policy (as mentioned above) because of the components included. Cash-value life insurance allows you to incorporate a savings or investment approach that you can utilize in certain situations while you are still living and without being subject to a tax liability. There are some instances that could result in taxes being owed.  Such as, taking a policy loan and not repaying it or surrendering the policy for cash.

The cash-value component grows tax-deferred, and if you can max out your retirement plans, this is an opportunity to invest the excess money in a tax-deferred account. Investors, at times, experience a financial hiccup in life, and having this type of account may allow them to borrow against the cash-value component, and for some individuals, money can be withdrawn without penalty (as would typically occur if withdrawing from a 401(k) or an IRA, until you are eligible).


Accelerated benefits option

In the unexpected event of a serious medical emergency, such as a heart attack or life-threatening cancer diagnosis, you may be eligible to receive your benefits during your lifetime. Depending on your policy, you may be entitled to withdraw between 25% and 100% of the value.



An annuity is a strategy individuals consider because it guarantees income in retirement and can become more attractive for those closing in on that retirement date as the annuity payments are used to replace paychecks.

When it comes to annuities, you have a couple of different options. The most basic type is a single premium immediate annuity. You contribute a set amount of money to the insurance company, and they, in turn, pay you a fixed amount monthly, quarterly, or annually for the rest of your life and, depending on the structure of the annuity, for the rest of your spouse’s life as well.


Discussing your retirement plans with your family

Being transparent with your family about financial issues and retirement plans for you and your spouse helps to build trust with your loved ones. It also empowers them should it become necessary to make financial decisions on your behalf.

Creating an open and safe communication environment allows everyone to participate and share their thoughts and feelings, especially when dealing with such an important topic as you and your family’s financial strategies, goals, and potential concerns. It may even be beneficial to sit down as a family with your financial professional who can provide an informed outside perspective.


Consulting your financial professional

Life insurance, annuities, and other long-term insurance strategies can be very complex and impact you and your financial goals in the future, even well into your retirement years. Consider consulting your financial professional to help you design a plan to utilize your insurance policies to benefit you and your family for years to come.



Long-Term Care Statistics To Know in 2024 -

Why Long-Term Care Insurance Falls Short for So Many - The New York Times (

Long-Term Care Insurance Explained - NerdWallet


Important Disclosures:

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions.

LPL Tracking #568515